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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-K/A
Amendment No. 1 to
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 (Fee Required)
For the 52-Week Period Ended Commission File
December 30, 1995 No. 0-17540
MONTGOMERY WARD HOLDING CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3571585
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Montgomery Ward Plaza, Chicago, Illinois 60671-0042
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (312) 467-2000
Securities registered pursuant to Section 12(b) of the Act
Title of each class Name of each exchange
on which registered
Not Applicable None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, Series 1, $.01 Par Value
(Title of class)
Class A Common Stock, Series 2, $.01 Par Value
(Title of class)
Voting Trust Certificates representing Shares of Class A Common
Stock, Series 1, $.01 Par Value
(Title of class)
Voting Trust Certificates representing Shares of Class A Common
Stock, Series 2, $.01 Par Value
(Title of class)
Class B Common Stock, $.01 Par Value
(Title of class)
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X .
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X . No .
At April 22, 1996, there were 18,708,169 shares of Class A
Common Stock and 25,000,000 shares of Class B Common Stock of the
Registrant outstanding.
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<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 10 is hereby amended in its entirety to read as follows:
Information as to executive officers required by this item is
included under the caption "Executive Officers of the Registrant"
beginning on page 15 of the Company's Annual Report on Form 10-K.
Information as to directors required by this item is as follows
(information with respect to ages of the directors is as of April
1, 1996):
Bernard F. Brennan, age 57, has been Chief Executive Officer
and a director of the Company since February 9, 1988, has been
Chairman since June 17, 1988, and was President from February 9,
1988 through September 10, 1992. Mr. Brennan has been Chief
Executive Officer and a director of Montgomery Ward & Co.,
Incorporated, a wholly-owned subsidiary of the Company,
("Montgomery Ward"), since May 13, 1985, and became Chairman of
Montgomery Ward on June 24, 1988. He served as President of
Montgomery Ward from May 13, 1985 through September 10, 1992. Mr.
Brennan has been a director of Itel Corporation since 1988.
Spencer H. Heine, age 53, has been an Executive Vice
President, Secretary and General Counsel of the Company since
September 30, 1991 and a director since May 15, 1992. Prior
thereto, he was Senior Vice President, Secretary and General
Counsel of the Company from June 17, 1988 through September 29,
1991. Mr. Heine has been Executive Vice President, Secretary and
General Counsel of Montgomery Ward and President--Montgomery Ward
Properties since April 12, 1994. Prior thereto, Mr. Heine served
as Executive Vice President, Legal and Financial Services of
Montgomery Ward from September 30, 1991 to April 11, 1994. He
served as Senior Vice President - Legal and Real Estate of
Montgomery Ward from March 28, 1990 through September 29, 1991.
Mr. Heine was Chairman and Chief Executive Officer of Signature
Financial/Marketing, Inc., a wholly-owned subsidiary of Montgomery
Ward ("Signature"), from March 8, 1993 to April 11, 1994. Prior
thereto, he also served as President of Signature since September
30, 1991. Mr. Heine has served on the Board of Trustees of First
Union Real Estate Equity and Mortgage Investments since April 1996.
G. Joseph Reddington, age 54, has been a director of the
Company since September 22, 1994. Mr. Reddington has been Chairman
and Chief Executive Officer of Signature since April 12, 1994.
Prior thereto, he was President and Chief Executive Officer of
Sears Canada, Inc. from 1989 until his retirement in December 1993.
Mr. Reddington has been a director of TransWorld Airlines since
August 1993 and a director of Loblaw Companies Ltd. since August
1994.
John L. Workman, age 44, has been a director of the Company
since May 12, 1995. Mr. Workman has been Executive Vice President,
Chief Financial Officer and Assistant Secretary of the Company
since January 28, 1994. Prior thereto, he served as Senior Vice
President, Chief Financial Officer and Assistant Secretary of the
Company from August 31, 1992 through January 27, 1994 and as Vice
President and Assistant Secretary of the Company from May 15, 1992
through August 30, 1992. Mr. Workman has been Executive Vice
President and Chief Financial Officer of Montgomery Ward since
January 28, 1994 and served as Senior Vice President and Chief
Financial Officer from August 31, 1992 through January 27, 1994.
Prior thereto, he served as Vice President and Corporate Controller
of Montgomery Ward from January 16, 1991 through August 30, 1992.
Myron Lieberman, age 65, has been a director of the Company
since June 25, 1988. He is a senior partner in the law firm of
Altheimer & Gray and has practiced law in Chicago, Illinois since
1954.
Silas S. Cathcart, age 69, has been a director of the Company
since June 25, 1988. In January, 1990 Mr. Cathcart, who is
retired, resigned as Chairman of Kidder, Peabody Group Inc. Mr.
Cathcart has been a director of Illinois Tool Works, Inc. since
1964 and a director of General Electric Financial Services, Inc.
and General Electric Capital Corporation ("GE Capital") since 1987.
He also is a director of Quaker Oats Company, Baxter International
and General Electric Company.
Denis J. Nayden, age 41, has been a director of the Company
since June 25, 1988. Mr. Nayden has been President and Chief
Operating Officer of GE Capital since January 1, 1995. Mr. Nayden
served as President and Chief Operating Officer of Kidder, Peabody
Group, Inc. from June 1994 through December 1994. Prior thereto,
Mr. Nayden was an Executive Vice President of GE Capital from
February 1989 to June 1994. Mr. Nayden is a director of General
Electric Financial Services, Inc., and GE Capital.
James A. Parke, age 50, has been a director of the Company
since April 27, 1990. He has been Senior Vice President - Finance
of General Electric Financial Services, Inc. since November, 1989.
Mr. Parke is a director of FGIC Corporation, Polaris Holding Co.,
GE Credit International, N.V. and Financial Guaranty Insurance Co.
Daniel W. Porter, age 40, has been a director of the Company
since May 12, 1995. Mr. Porter has been President and Chief
Executive Officer of Retailer Financial Services, Inc., a wholly-
owned subsidiary of GE Capital, since March 30, 1995. Prior
thereto, he served as President and Chief Executive Officer of
Retailer Financial Services -- North America from September 1993
through March 1995. He served as Vice President and General
Manager of GE Capital's Private Label Financing business from April
1990 through September 1993. Prior thereto, Mr. Porter served as
Vice President and Manager of GE Capital's Automobile Financial
Ventures Group from November 1988 through April 1990.
Item 11. Executive Compensation
Item 11 is hereby amended in its entirety to read as follows:
The Company had no employees and paid no compensation in 1995.
The following information details compensation accrued by
Montgomery Ward and its subsidiaries to executive officers of the
Company.
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth summary compensation
information for (i) the Company's Chief Executive Officer, (ii) the
four most highly compensated other executive officers who were
serving as executive officers at the end of the Company's 1995
fiscal year (collectively, the "Named Executive Officers") and
(iii) Mr. Richard Bergel, who retired during 1995, but who would
have qualified under clause (ii) above had he been serving as an
executive officer at the end of the Company's 1995 fiscal year.
<TABLE>
<CAPTION>
Annual Compensation Long Term
Compensation
Other Securities All Other
Name and Annual Underlying LTIP Compen-
Principal Position Year Salary($) Bonus($) Compensation Options Payout sation
($)1 (#) ($) ($)2
<S> <C> <C> <C> <C> <C> <C> <C>
Bernard F. Brennan 1995 975,000 400,000 166 ------ 472,600 1,890
Chairman and Chief 1994 950,000 565,600 1,912 ------ 777,600 2,399
Executive Officer 1993 1,052,500 400,000 3,747,054 ------ 732,555 2,936
G. Joseph Reddington 1995 600,000 282,000 277 ------ 166,900 0
Chairman and Chief 1994 410,000 250,000 44 300,000 288,900 0
Executive Officer-
Signature
Financial/
Marketing Inc.3
Spencer H. Heine 1995 400,000 50,000 3,400 ------ 100,000 1,890
Executive Vice 1994 391,667 76,780 2,330 ------ 192,600 2,399
President, Sec- 1993 279,167 75,000 59,196 ------ 101,775 2,936
retary and General
Counsel
Gene C. McCaffery 1995 437,500 0 0 100,000 86,372 1,890
Executive Vice 1994 350,000 88,000 5,619 ------ 117,200 2,399
President4 1993 255,208 75,000 10,144 70,000 90,304 2,936
Robert Connolly 1995 400,000 0 426 ------ 0 1,890
Executive Vice 1994 397,850 100,000 1,077,471 150,000 175,000 0
President5
Richard Bergel6 1995 653,846 20,000 115,688 ------ 150,000 1,890
1994 562,500 200,000 27,962 200,000 288,900 2,399
1993 404,167 130,000 279,336 ------ 200,700 2,936
</TABLE>
1 Includes company paid legal fees, taxes paid on stock transfers and
purchases of Company stock at below-market prices. Also includes
executive perquisites for Mr. Bergel (primarily moving expenses of
$53,537 for 1995, a living expense allowance of $62,150 and $27,201
for 1995 and 1993, respectively, and a cash bonus equal to related
income taxes of $21,160 for 1993). No other named executive officer
received perquisites exceeding $50,000 or 10% of salary and bonus.
2 Represents Company matching contributions to the Savings and Profit
Sharing Plan.
3 Mr. Reddington joined the Company as Chairman and Chief Executive
Officer of Signature ("Signature") on April 28, 1994.
4 Mr. McCaffery resigned as an officer of the Company in March 1996.
5 Mr. Connolly joined the Company as Executive Vice President in
February 1994 and resigned from the Company in January 1996.
6 Mr. Bergel retired in November 1995.
<PAGE>
OPTION GRANTS AND EXERCISES
The following tables set forth summaries of the terms of stock
options granted to Mr. McCaffery during the Company's 1995 fiscal
year and the value of unexercised options held by Messrs.
Reddington, McCaffery and Connolly as of December 30, 1995, using
assumed annual rates of stock price appreciation. No Named
Executive Officer other than Mr. McCaffery received options during
the 1995 fiscal year. None of the Named Executive Officers
exercised any stock options during the 1995 fiscal year. No stock
appreciation rights were granted to or exercised by any of the
Named Executive Officers during the 1995 fiscal year.
Option Grants In Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term
No. of Percentage of
Securities Total Options
Underlying Granted to Exercise
Options Associates Or Base
Granted In Fiscal Price Expiration
Name (#) Year ($/Sh) Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Gene C. McCaffery 100,000 16.3% 24.50 7/11/2005 1,540,000 3,905,000
</TABLE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options at FY-End (#) In-the-Money Options at FY-End
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
G. Joseph
Reddington 200,000 100,000 800,000 0
Gene C.
McCaffery 165,102 104,648 1,293,380 10,530
Robert Connolly 75,000 75,000 150,000 150,000
</TABLE>
<PAGE>
LONG TERM INCENTIVE PLAN AWARDS
Certain senior executives of Montgomery Ward are eligible to participate in
the Executive Long-Term Incentive Plan. To receive an award, the participant
must, on the last day of the applicable cycle, be the chief executive officer of
the Company or be among the four highest compensated officers of the Company
(not taking into account the chief executive officer). The Executive Long-Term
Incentive Plan generally consists of three-year cycles that can be initiated
annually. If specific objectives for the pre-tax earnings and return on
equity for the Company and its subsidiaries established by the Incentive
Compensation Committee are achieved for any designated cycle, cash is awarded
based upon a target Executive Long-Term Incentive Plan payout, which is a
percentage (determined by the Incentive Compensation Committee) of the base
salary of each participant, but in no event may the target Executive Long-Term
Incentive Plan payout for any participant exceed $2,000,000 for any cycle.
Satisfactory performances below or above target performance objectives are
arithmetically interpolated to determine preliminary payouts under the
Executive Long-Term Incentive Plan. The Incentive Compensation Committee may,
in its discretion, reduce the Executive Long-Term Incentive Plan payout of any
participant. No award shall be made if the Incentive Compensation Committee
determines that the participant's conduct has been detrimental to the Company or
its subsidiaries.
For 1995 the Incentive Compensation Committee set performance goals for
the cycle beginning in 1995 based on pre-tax earnings and return on equity.
Until the Incentive Compensation Committee determines otherwise, the target
payout will be based on 85% of base salary at the time of payout for the
chief executive officer and 50% of base salary at the time of payout for all
other participants. Executives who are hired into the eligible participant
group after the beginning of a cycle will have a target Executive Long-Term
Incentive Plan payout prorated based on the proportion of the cycle objectives
achieved after the first day of the quarter following their commencement of
employment through the end of the cycle. Until the Incentive Compensation
Committee determines otherwise with respect to subsequent cycles not yet
commenced, the pre-tax earnings and return on equity objectives are weighted
sixty percent (60%) and forty percent (40%), respectively.
<PAGE>
The following table sets forth information regarding the
participation of the Named Executive Officers in the three-year
award cycle under the Montgomery Ward Executive Long-Term Incentive
Plan commencing in the Company's 1995 fiscal year.
Long-Term Incentive Plans - Awards in Last Fiscal Year
<TABLE>
<CAPTION>
Performance Estimated Future Payouts under Non-Stock
Number of or Other Price-Based Plans
Shares, Units Period Until
or Other Maturation or
Name Rights (#)1 Payout Threshold($)2 Target($)3 Maximum($)4
<S> <C> <C> <C> <C> <C>
Bernard F. Brennan 850,000 1997 425,000 850,000 1,275,000
G. Joseph Reddington 300,000 1997 150,000 300,000 450,000
Spencer H. Heine 200,000 1997 100,000 200,000 300,000
Gene C. McCaffery5 --- --- --- --- ---
Robert Connolly5 --- --- --- --- ---
Richard Bergel6 --- --- --- --- ---
</TABLE>
1 Units each represent one dollar of target payout, based on
a target of 50% of current base salary for Messrs. Reddington,
Heine, McCaffery, Connolly and Bergel and 85% of current base
salary for Mr. Brennan.
2 While there are no per se threshold payouts under the
Executive Long-Term Incentive Plan, it is unlikely that the
Incentive Compensation Committee would approve payouts if
arithmetic interpolation of the targets would result in a payout
less than 50% of target payouts.
3 Target levels are based on the attainment of target
performance goals, with no adjustment to the payout made by the
Incentive Compensation Committee.
4 While there are no per se maximum payouts under the
Executive Long-Term Incentive Plan (other than the $2,000,000
payout maximum), it is unlikely that the Incentive Compensation
Committee would approve payouts in excess of 150% of target
payouts.
5 Messrs. McCaffery and Connolly resigned as officers of the
Company in 1996. They will receive no further payouts under the
Executive Long-Term Incentive Plan. Had they not resigned, Messrs.
McCaffery and Connolly would have been eligible to receive from
"threshold" levels of $112,500 and $100,000, respectively, to
"maximum" payouts of $337,500 and $300,000, respectively.
6 Mr. Bergel retired from his position as an officer of the
Company in 1995. He will receive no further payouts under the
Executive Long-Term Incentive Plan. Had he not retired, Mr. Bergel
would have been eligible to receive from a "threshold" level of
$150,000 to a "maximum" payout of $450,000.
PENSION PLAN
Executive officers of Montgomery Ward, in addition to many other
associates, participate in a pension plan (the "Pension Plan"), which
provides benefits defined by formulae based primarily on a participant's
annual compensation, offset as provided below by benefits provided by the
participant's accounts in the Savings and Profit Sharing Plan ("Savings Plan"),
in which executive officers of Montgomery Ward, in addition to many other
associates, participate. From 1989 through 1993, no more than $200,000, as
adjusted annually under Section 401(a)(17) of the Internal Revenue Code of
1986, as amended (the "Code"), of any participant's compensation was
considered for any purpose, including for purposes of the formulae, under
the Pension Plan. Beginning in 1994, no more than $150,000, as so adjusted,
of any participant's compensation is considered for any purpose, including
for purposes of the formulae, under the Pension Plan. The monthly pension
benefit to which current associates are entitled under the Pension Plan at
the normal retirement age of 65 is generally based on different benefit
formulae that are applicable to different years of service. The formula for
service after 1988 applies to credited service, as defined in the Pension Plan,
earned after 1988 while making contributions to the Savings Plan and is based
on "career earnings". A participant's annual benefit under the post-1988
formula is 1.5% of the participant's eligible pay for each year of credited
service after 1988. The Pension Plan formulae benefit is determined by adding
the benefit under the post-1988 formula to the participant's accrued benefit
under the Pension Plan as of December 31, 1988, as determined under the
formulae in effect prior to 1988. A participant's benefit determined under the
Pension Plan is reduced by an amount equivalent to an annuity which could be
purchased with the participant's Basic Contribution and Transferred
Contribution accounts in the Savings Plan.
The following table sets forth the estimated annual benefits
(calculated on a straight life annuity basis) upon retirement at
age 65 under the Pension Plan, which is the only defined benefit
plan under which associates of Montgomery Ward can currently accrue
benefits, to the Named Executive Officers (calculated on the basis
of estimated years of service at retirement age; levels of
compensation paid in calendar year 1995 (including compensation
pursuant to the Senior Executive Performance Management Program (the "PMP")),
assuming 6% annual increases (for executives who have not retired or resigned);
but with regard to Code limitations on compensation and benefits and without
regard to any reduction for benefits under the Savings Plan):
Estimated Annual Pension
Name of Participant at Retirement
Bernard F. Brennan . . . . 102,878
G. Joseph Reddington . . . 29,813
Spencer H. Heine . . . . . 89,965
Gene C. McCaffery1 . . . . 31,504
Robert Connolly1 . . . . . ---
Richard Bergel2. . . . . . 82,654
1 Mr. McCaffery resigned as an officer of the Company in
1996 and will receive a deferred retirement benefit under the
Pension Plan. Mr. Connolly resigned as an officer of the Company
in 1996 and will receive no benefits under the Pension Plan.
2 Mr. Bergel retired as an officer of the Company in 1995
and has begun receiving early retirement benefits under the Pension
Plan in the form of a joint and survivor annuity. The dollar
amount of such benefit is less than that set forth in the table.
CERTAIN ARRANGEMENTS
In the course of recruiting new executives, promoting existing
associates to executive positions and increasing the
responsibilities of existing executives, Montgomery Ward frequently
enters into employment agreements which set forth the general terms
of the compensation arrangements for such executive. Such
agreements have, in the past, typically set forth, among other
things, the executive's base salary, the executive's target bonus
under the PMP, the maximum percentage of the target bonus under the PMP
that can be earned, participation in the Executive Long Term
Incentive Plan with initial target bonuses for applicable Executive
Long Term Incentive Plan cycles, the percentage of the executive's
base pay that can be earned annually through the Executive Long
Term Incentive Plan after the initial bonus target period has run,
bonus guarantees, if any, and the number of stock options, if any,
that will initially be granted to the executive in his or her new
position. Of the executive officers named in the Summary
Compensation Table, Mr. Reddington has an agreement of this type
and Messrs. Connolly and Bergel had agreements of this type.
Mr. Reddington and Montgomery Ward entered into their
agreement in connection with Mr. Reddington's appointment to the
position of Chairman and Chief Executive Officer of Signature; Mr.
Connolly and Montgomery Ward entered into their agreement in
connection with Mr. Connolly's appointment to the position of
Executive Vice President, Apparel of Montgomery Ward; and Mr.
Bergel and Montgomery Ward entered into their agreement in
connection with Mr. Bergel's appointment to the position of Chief
Executive Officer of Lechmere, Inc., a subsidiary of Montgomery
Ward. The agreements with Mr. Reddington provides, and the
agreements with Messrs. Connolly and Bergel provided for,
respectively, (i) initial annual base salary of $600,000, $400,000
and $600,000; (ii) PMP target bonuses of $250,000, $100,000 and
$250,000, in each case guaranteed at 100% for 1994, and in each
case with opportunities to earn up to 150% of such target bonuses;
and (iii) Executive Long Term Incentive Plan participation at a
target bonus level of base salary for each executive of 50%. The
agreement with Mr. Reddington stated that he would receive options
to purchase 100,000 Class A Shares at $16.50 per share, with such
options vesting 50% on July 1, 1994 and the remaining 50% on July 1, 1995, and
options to purchase 200,000 Class A Shares at $26.50 per share,
with such options vesting 50% on January 31, 1995 and the remaining 50% on
January 31, 1996. Mr. Reddington was granted all of such options
on December 28, 1994. The agreement with Mr. Connolly stated that
he would receive options to purchase 150,000 Class A Shares at
$22.50 per share, with such options vesting 50% on January 1, 1995
and the remaining 50% on January 1, 1996. Mr. Connolly was granted all of such
options in January, 1994. The agreement with Mr. Bergel stated
that he would receive options to purchase 200,000 Class A Shares at
$22.50 per share, with such options vesting 100% on April 4, 1996.
Mr. Bergel was granted such options on July 1, 1994. The
agreement with Mr. Connolly also provided for a hiring bonus of
$50,000. The agreement with Mr. Connolly also provided that the
Company would recommend that he be granted the right to purchase
25,000 Class A Shares at a purchase price of $.20 per share. Mr.
Connolly purchased such shares on February 3, 1994.
Mr. Bergel's employment agreement also provided that if,
before March 1, 1996, Mr. Bergel incurs state tax liability on
dividends paid on the Company's Common Stock or on his sale of such
stock in a public market, the Company will "gross-up" such taxes to
the extent they exceed 3.0%. Each of the employment agreements
also contained certain severance arrangements. The agreement with
Mr. Reddington provides that if he terminates his employment prior
to December 31, 1997 under certain circumstances or in the event of
a change in control of Signature, Mr. Reddington is entitled to his
base salary and bonuses through December 31, 1997 in addition to
Executive Long Term Incentive Plan awards. Mr. Bergel's employment
agreement provided that upon Mr. Bergel's retirement, he would be
permitted to sell 25% of the Class A Shares held by him to the
Company for cash in each of the year of such retirement and the
next succeeding three (3) years. On January 3, 1996, Mr. Bergel
sold 198,125 Class A Shares to the Company in connection with this
agreement. Also upon Mr. Bergel's retirement, Montgomery Ward
agreed to provide him with a 100% relocation package to move to any
location of his choice in the continental United States.
The normal severance plan for certain senior officers of
Montgomery Ward provides that upon termination of a participating
officer's employment with Montgomery Ward, for reasons other than
cause, death, retirement or resignation, the senior officer will
receive from Montgomery Ward a payment equal to 12 months of his or
her base pay. Each of the executive officers named in the Summary
Compensation Table who is currently employed by Montgomery Ward is
a participant in this severance plan.
Certain senior executives of Montgomery Ward are participants
in each of a retention plan and a security plan. The retention
plan provides that each participant will receive a retention award
if such participant remains employed by Montgomery Ward through
March 1, 1997 or is terminated for any reason other than voluntary
resignation or cause. In addition, if there is a change of control
of Montgomery Ward prior to such date, the retention award will be
payable at the closing of such transaction. The security plan,
which expires on January 31, 2001, provides that in the event of a
sale or change of control of Montgomery Ward, each participant who
is, on the date of closing of such transaction, actively employed
by Montgomery Ward or who was terminated for reasons other than
voluntary resignation or cause within one year of such date will
receive: (i) a bonus payable on the closing date of such
transaction; (ii) an award supplement, at the discretion of the
Board of Directors based on the recommendation of the Chief
Executive Officer, with respect to the participant's contribution
and cooperation in the transaction; (iii) enhanced severance of an
additional twelve months base salary above the amount to which the
participant would have been entitled under the severance plan
described above if, during the first two years following the
transaction, the participant is either (x) terminated for any
reason other than voluntary termination or cause or (y) demoted
without the participant's prior written approval; (iv) continuation
of benefits for the entire severance payment period; (v)
outplacement services; and (vi) certain tax preparation and
financial planning services. The participants in the retention
plan and the security plan currently consist of eight (8) senior
officers of the Company, including Mr. Heine, whose retention award
under the retention plan is $200,000, whose bonus under the
security plan is $150,000, and whose award supplement maximum is
$150,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Brennan, Chief Executive Officer of the Company and Chief
Executive Officer of Montgomery Ward, serves as a member of the
Compensation Committee of Montgomery Ward's Board of Directors.
Robert A. Kasenter, Executive Vice President of the Company and
Executive Vice President, Human Resources of Montgomery Ward,
serves as Secretary of the Compensation Committee of Montgomery
Ward's Board of Directors, although Mr. Kasenter is not a director
of the Company or of Montgomery Ward.
DIRECTOR COMPENSATION ARRANGEMENTS
Messrs. Cathcart and Lieberman are paid director fees of
$6,000 per fiscal quarter, plus $1,500 for each meeting such
director attends of the Board of Directors of MW Holding and
Montgomery Ward, plus $1,500 for each meeting such director attends
of a committee of MW Holding and Montgomery Ward of which such
director is a member, provided that if a meeting of the Board of
Directors of MW Holding is held jointly with or immediately prior
to or following a meeting of the Board of Directors of Montgomery
Ward, the aggregate fees for such meetings shall be $1,500, and
provided further that if a meeting of a committee of MW Holding is
held jointly with or immediately prior to or following a meeting of
a committee of Montgomery Ward the aggregate fees for such meetings
shall be $1,500. Such directors fees may be converted into Series
1 or Series 2 Shares pursuant to the Directors Fee Plan described
below. Directors of the Company who are also executive officers of
Montgomery Ward currently receive no directors fees or other
compensation for their service as directors of the Company.
Likewise, directors of the Company who are designated by GE Capital
(other than Mr. Cathcart) currently receive no directors fees or
other compensation for their service as directors of the Company.
In December 1990, the Board of Directors adopted a plan, which
was approved by the shareholders in May 1991, allowing Messrs.
Cathcart and Lieberman to elect to receive all or any portion of
the fees for their services as directors of the Company and
Montgomery Ward in Series 1 Shares. In May 1991, the Board of
Directors amended and restated the plan as the Directors Plan (the
"Directors Fee Plan") to permit (a) the participation of additional
directors, (b) the receipt of Series 2 Shares as well as Series 1
Shares and (c) the establishment of a committee (the "Directors Fee
Plan Committee") to (i) administer the plan, (ii) estimate director
fees payable to directors for the fiscal year and (iii) permit
directors to elect to receive Class A Shares with a value
determined by the Directors Fee Plan Committee not to exceed the
estimated fees. The Directors Fee Plan as so amended and restated
was approved by the shareholders on May 17, 1991.
Directors of the Company or Montgomery Ward other than members
of the Directors Fee Plan Committee are eligible to participate in
the Directors Fee Plan if designated by the Directors Fee Plan
Committee. The Directors Fee Plan Committee is comprised of not
fewer than two directors who are appointed by the Board of
Directors and who serve at the pleasure of the Board of Directors.
The current members of the Directors Fee Plan Committee are Messrs.
Brennan and Heine. Of the seven eligible directors, the Directors
Fee Plan Committee has designated only Messrs. Cathcart and
Lieberman as participants in the Directors Fee Plan as of April 6,
1995. Pursuant to an irrevocable election made in 1992, each of
Messrs. Cathcart and Lieberman has elected to receive all of the
fees earned by them for service as directors of the Company and of
Montgomery Ward in Series 1 Shares. As of April 2, 1996, Messrs.
Cathcart and Lieberman have acquired 7,377 and 8,693 Series 1
Shares, respectively, pursuant to rights ("Conversion Rights")
under the Directors Fee Plan.
Conversion Rights are automatically granted after the end of
each fiscal quarter of the Company to participating directors in a
number determined by dividing the director fees for the fiscal
quarter by the fair market value per share of the Company's Common
Stock. The number of Class A Shares acquired pursuant to
accelerated Conversion Rights (as described below) reduces the
number of automatically granted Conversion Rights.
The acquisition of Class A Shares by directors pursuant to
Conversion Rights does not require any direct payment by a
director, but the director fees which otherwise would be payable to
the director are reduced by such fair market value of the Class A
Shares acquired. If directors acquire Class A Shares pursuant to
Conversion Rights, the Company will pay the directors an amount
sufficient to pay all applicable federal and state taxes payable by
the directors with respect to the Class A Shares acquired pursuant
to Conversion Rights and the amount attributable to this payment.
The Directors Fee Plan Committee decides based on the past
service of the director whether there should be an acceleration of
the grant of Conversion Rights based on an estimate of director
fees for the fiscal year. If the grant of Conversion Rights is
accelerated by the Directors Fee Plan Committee, the Directors Fee
Plan Committee determines the number of Class A Shares to which the
Conversion Rights relate, the value of the Class A Shares, the
duration of the Conversion Rights and the limitations on the Class
A Shares acquired pursuant to the Conversion Rights. It is
currently anticipated that any Class A Shares acquired pursuant to
accelerated Conversion Rights would be forfeited to the extent a
director does not earn the anticipated director fees for the fiscal
year.
The Board of Directors may amend or terminate the Directors
Fee Plan, except that no such action by the Board of Directors may
change the terms and conditions of any Conversion Rights previously
granted in a manner adverse to the holder of the Conversion Right
without the consent of such holder. Shareholder approval of an
amendment to the Directors Fee Plan is necessary if required for
compliance with Rule 16b-3 ("Rule 16b-3") promulgated under Section
16(b) of the Securities Exchange Act of 1934, as amended (the
"Act"), and the timing of certain amendments may be limited by Rule
16b-3. The Directors Fee Plan Committee has the right to make
adjustments with respect to Conversion Rights if Montgomery Ward or
the Company dissolves or is liquidated or upon the occurrence of a
public offering of shares of the Company.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 12 is hereby amended in its entirety to read as follows:
The following table sets forth the beneficial ownership, as of
April 1, 1996, of shares of Class A Common Stock of the Company ("Class A
Shares") (i) by each person who is a director of the Company (none of whom
except the individuals identified owns any shares of the Company's equity
securities), (ii) by each of the Named Executive Officers, (iii) by each person
who is known to be a holder of more than 5% of Class A Shares and
(iv) by all directors and executive officers of the Company as a
group.
Individual or Group Shares %
Bernard F. Brennan (a) 16,527,872 88.3%
Myron Lieberman (b) 2,512,943 13.4%
John L. Workman (c)(d) 221,600 1.2%
G. Joseph Reddington (e) 300,000 1.6%
Spencer H. Heine (c) 251,250 1.3%
Gene C. McCaffery (c)(f) 221,750 1.2%
Robert Connolly (c)(g) 25,000 0.1%
Richard Bergel (c)(h) 654,375 3.5%
Silas S. Cathcart (c)(i) 17,621 0.1%
Tamara Brennan (j) 2,200,000 11.7%
All directors and executive
officers as a group
(15 persons) (k) 17,307,524 90.0%
_______________________________________________________
(a) Comprised of 13,025,750 Class A Shares (69.6% of the Class A
Shares and 29.8% of the Company's common stock (the "Common Stock")
outstanding as of April 1, 1996) owned of record by Mr. Brennan and with
respect to which Mr. Brennan has sole investment and voting power, and
3,502,122 Class A Shares (18.7% of the Class A Shares and 8.0%
of the Common Stock outstanding as of April 1, 1996) owned of
record by Mr. Brennan as voting trustee and with respect to
which Mr. Brennan has sole voting power as voting trustee but
no investment power. Does not include 2,200,000 Class A
Shares (11.7% of the Class A Shares and 5.0% of the Common
Stock outstanding as of April 1, 1996) which are owned by
Myron Lieberman, as trustee of a trust (the "Family Trust")
for the benefit of members of Mr. Brennan's family with
respect to which Mr. Brennan has no voting or investment
power, but with respect to which Tamara Brennan, Mr. Brennan's
wife, may acquire shared voting and dispositive power. See
Note (j) below. Mr. Brennan disclaims beneficial ownership of
such 2,200,000 Class A Shares. Mr. Brennan's business address
is Montgomery Ward Plaza, Chicago, Illinois 60671.
(b) Includes 294,250 Class A Shares represented by Voting Trust
Certificates owned by Lieberman Investment Limited
Partnership, a limited partnership of which Mr. Lieberman is
the sole general partner. Also includes 2,200,000 Class A
Shares with respect to which Mr. Lieberman has sole voting and
investment power as trustee of the Family Trust. Such
2,200,000 Class A Shares are not deposited in the voting trust
under which Mr. Brennan serves as voting trustee. See Note
(c) below. All shares other than the 2,200,000 Class A Shares
as to which Mr. Lieberman has beneficial ownership are
represented by Voting Trust Certificates and such shares are
held in a voting trust as to which Mr. Brennan, as voting
trustee, has sole voting power. Includes 306 Class A Shares
which Mr. Lieberman acquired on April 8, 1996 pursuant to
Conversion Rights which arose on April 1, 1996 and which,
pursuant to a prior election by Mr. Lieberman, were
automatically exercised on April 8, 1996. Mr. Lieberman's
business address is 10 South Wacker Drive, Chicago, Illinois
60606.
(c) Represents ownership of Voting Trust Certificates with respect
to shares held in a voting trust (the "Voting Trust") as to
which Mr. Brennan, as voting trustee, has sole voting power
and the persons indicated have sole investment power.
(d) Includes 154,200 Class A Shares which may be acquired by Mr.
Workman pursuant to options exercisable on April 1, 1996.
Also includes 600 Class A Shares which may be acquired by Mr.
Workman pursuant to options which become exercisable on June
23, 1996 (a date within 60 days of the date hereof).
(e) Includes 300,000 Class A Shares which may be acquired by Mr.
Reddington pursuant to options exercisable on April 1, 1996.
(f) Includes 169,750 Class A Shares which may be acquired by Mr.
McCaffery pursuant to options exercisable on April 1, 1996.
Mr. McCaffery resigned as an officer of the Company in 1996.
As a result, Class A Shares held by Mr. McCaffery and any
Class A Shares acquired by him pursuant to the exercise of the
options reported herein will be subject to certain purchase
and repurchase options. The Company anticipates exercising
its repurchase options with respect to such shares.
(g) Mr. Connolly resigned as an officer of the Company in 1996.
As a result, Class A Shares held by Mr. Connolly are subject
to certain purchase and repurchase options. On March 22,
1996, the Company exercised its repurchase options with
respect to such shares.
(h) Includes 60,000 Class A Shares with respect to which Mr.
Bergel has sole investment power as trustee of trusts for the
benefit of members of the family of Robert A. Kasenter, an
officer of the Company.
(i) Includes 306 Class A Shares which Mr. Cathcart acquired on
April 8, 1996 pursuant to Conversion Rights which arose on
April 1, 1996 and which, pursuant to a prior election by Mr.
Cathcart, were automatically exercised on April 8, 1996.
(j) Represents Class A Shares with respect to which Mrs. Brennan,
if she were to elect to become an advisor to the trustee of
the Family Trust, may acquire shared power to vote or direct
the vote of, and shared power to dispose or direct the
disposition of, such shares. See Notes (a) and (b) above.
(k) Represents all Class A Shares with respect to which executive
officers and directors have investment power, which is in each
case sole investment power. Does not include 1,420,348 Class
A Shares with respect to which Mr. Brennan has sole voting
power as voting trustee, but with respect to which neither he
nor any other executive officer or director of the Company has
investment power. Includes 502,660 Class A Shares which may
be acquired by executive officers or directors at purchase
prices ranging from $0.20 to $26.50 per share pursuant to
options exercisable on April 1, 1996. Includes 612 Class A
Shares which were acquired by directors on April 8, 1996
pursuant to Conversion Rights which arose on April 1, 1996 and
which, pursuant to prior elections by such directors, were
automatically exercised on April 8, 1996. Includes 1,300
Class A Shares which can be acquired pursuant to options which
become exercisable on June 23, 1995 (a date within 60 days of
the date hereof).
GE Capital owns 100% of the 25,000,000 shares of Class B Common Stock of
the Company currently outstanding. Such shares represented 56.6% of the
outstanding Common Stock as of April 1, 1996. GE Capital owns 100%
of the 1,750 shares of Senior Preferred Stock of the Company,
having a liquidation value of $100,000 per share (the "Senior
Preferred Stock") outstanding as of the date hereof. Such shares
represent 100% of the Company's outstanding preferred stock. GE
Capital's address is 260 Long Ridge Road, Stamford, Connecticut
06902.
Item 13. Certain Relationships and Related Transactions
Item 13 is hereby amended in its entirety to read as follows:
In 1991, Montgomery Ward arranged lines of credit with the
Northern Trust Company and the First National Bank of Chicago (the
"Banks") totaling an aggregate of not more than $10,000,000, of
which $921,000 is currently available to nine associates, including
directors who are associates of Montgomery Ward and executive
officers of the Company (the "Line of Credit Program"). A
committee of the Board of Directors of the Company (consisting of
Messrs. Brennan and Lieberman) determines which associates are
eligible to borrow money under the Line of Credit program and the
maximum amounts which each, respectively, can borrow. Any director
or executive officer desiring to borrow money from a Bank under the
Line of Credit Program is required to pledge to such Bank as
collateral a number of Class A Shares of vested stock of the
Company held by the individual, the fair market value of which is
equal to twice the amount the individual desires to borrow. All
loans are payable in five years with annual interest payments. Any
loan may be prepaid without penalty. Interest accrues at the
lending Bank's prime rate. The Company has agreed with the Banks
that, in the event any individual should default upon his or her
repayment obligations, the Company will purchase the note from the
Bank or purchase the pledged stock from the Bank at the fair market
value with the entire amount defaulted upon to be paid by the
Company if, and to the extent, the defaulted amount exceeds the
amount of the payment for the Class A Shares. As of December 30,
1995, one (1) loan in excess of $60,000 is outstanding to executive
officers of the Company under the Line of Credit Program: Robert A.
Kasenter, Executive Vice President of the Company, for $202,535.
Montgomery Ward, and its wholly-owned subsidiary Lechmere,
Inc., entered into a memorandum of understanding and interim
agreements in March and April 1996 with GE Capital and its wholly-
owned subsidiaries Montgomery Ward Credit Corporation ("Montgomery
Ward Credit") and Monogram Credit Card Bank of Georgia ("Monogram")
pursuant to which Monogram is extending credit to retail customers
under an open-end revolving credit plan on terms similar to those
applicable to the prior arrangements described below, subject to
certain material changes from the terms described below underlying
the sharing of certain additional revenues generated by increases
in interest rates and late fee charges to customers and the
extension of credit to the customers directly by Monogram. If
definitive agreements are not entered into by the parties
permanently implementing the changes contemplated by the memorandum
of understanding and interim agreements, the parties will revert to
the prior arrangements, outlined below. In addition, pursuant to
an agreement dated April 3, 1996, Montgomery Ward and Lechmere,
Inc. agreed to sell to Montgomery Ward Credit receivables from
certain commercial customers of Montgomery Ward.
Pursuant to the prior arrangements, Montgomery Ward extended
credit to its customers under an open-end revolving credit plan and
in connection therewith, Montgomery Ward and Montgomery Ward Credit
entered into an Account Purchase Agreement pursuant to which
Montgomery Ward Credit purchased receivables from time to time and
provided services to Montgomery Ward. Under the terms of a letter
agreement dated June 24, 1988 among Signature, Montgomery Ward
Credit and Montgomery Ward, Montgomery Ward Credit also purchased
the customer accounts receivable of Signature on terms similar to
those contained in the Account Purchase Agreement. Set forth below
is a description of various transactions entered into in connection
with the Account Purchase Agreement and in connection with the
letter agreement. Unless otherwise specified, information given is
for aggregate transactions under both the Account Purchase
Agreement and the letter agreement. As of December 30, 1995, there
were $5.3 billion of Montgomery Ward private label credit card
receivables owned by Montgomery Ward Credit. During the 1995, 1994
and 1993 fiscal years, Montgomery Ward Credit purchased
approximately $3.9 billion, $4.1 billion and $4.0 billion,
respectively, of such receivables from Montgomery Ward. As of
April 1, 1996, Montgomery Ward Credit has purchased approximately
$666 million of such receivables from Montgomery Ward during the
current fiscal year. Effective January 1, 1994, Montgomery Ward
agreed to bear the entire risk of credit losses until Montgomery
Ward or Montgomery Ward Credit elects to revert to the prior loss
sharing arrangements. Presently, Montgomery Ward is maker on five
notes outstanding payable to Montgomery Ward Credit representing
credit losses in fiscal 1991-1995 before deducting the amount owed
to Montgomery Ward for its share of certain finance charges. The
five note balances are 1991 - $18,000,000, 1992 - $63,732,925, 1993
- - $25,507,000, 1994 - $53,652,000 and 1995 - $66,712,000. During
1992 and 1995, finance charge rates assessed on the Montgomery Ward
credit card were increased in certain states and during 1995 late
fees assessed on the Montgomery Ward credit card were increased in
certain states. Montgomery Ward is entitled to share in certain of
the finance charges and late charges. Under the Account Purchase
Agreement, Montgomery Ward's share of finance charges is available
for offset against the notes described above made by Montgomery
Ward payable to Montgomery Ward Credit. Such amount bears interest
at the same rate and is due at the same time as the notes payable
to Montgomery Ward Credit. The incremental finance charge offset
applicable to those notes is $44.2 million. Under the letter
agreement, Montgomery Ward Credit also provides administrative
services in connection with Signature products. Fees paid by
Signature to Montgomery Ward Credit for such services were
approximately $6 million, $5 million and $5 million for the
Company's 1995, 1994 and 1993 fiscal years, respectively.
Montgomery Ward has entered into a Program Agreement dated
October 12, 1989 with GE Capital, under which GE Capital pays
certain manufacturers and distributors a discounted invoice price
of products acquired by Montgomery Ward and whereby Montgomery Ward
reimburses GE Capital for such payments according to an agreed-upon
schedule. The aggregate amount of outstanding payments and other
amounts payable under the Program Agreement is not to exceed $350
million at any one time. During the Company's 1995 fiscal year,
Montgomery Ward reimbursed approximately $615 million to GE Capital
under the Program Agreement. As of April 1, 1996, Montgomery Ward
has reimbursed approximately $261 million under the Program
Agreement during the current fiscal year. The Company anticipates
continuing reimbursement obligations pursuant to the Program
Agreement.
General Electric Company, the parent of GE Capital, is, in the
ordinary course of its business, a major supplier of consumer goods
to Montgomery Ward for sale at Montgomery Ward's stores in the
ordinary course of its business.
Myron Lieberman, a director of the Company and Montgomery
Ward, is a senior partner in the law firm of Altheimer & Gray.
Altheimer & Gray renders legal services to the Company and its
subsidiaries as the regular outside counsel, and under a retainer agreement
entered into between Altheimer & Gray and the Company's general counsel, as the
counsel on specific matters which, prior to October, 1991, were handled by
internal legal counsel. During the Company's 1995 fiscal year, the Company and
its subsidiaries paid fees of approximately $3.8 million to Altheimer & Gray.
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MONTGOMERY WARD HOLDING CORP.
By:/s/ John L. Workman
John L. Workman, Executive
Vice President and
Chief Financial Officer
Date: April 29, 1996
